Most read articles: EUR/USD Trade Setup – Bull market continuation depends on breakout of resistance
The new week starts slowly as both the US and UK markets are closed on Monday. It's Memorial Day in the US and a bank holiday in the UK. The holidays in these financial centres mean less trading volume and potentially slower price movements. But there's a catch: low liquidity can lead to larger price movements when unexpected news breaks and there are fewer traders to absorb buy and sell orders. That said, caution is advised for those who decide to trade on Monday.
We expect this week to be relatively calm with few big impact events to cause major fluctuations. That said, that could change on Friday when key economic data is released. On one side of the Atlantic, the Eurozone's May CPI will be released. On the other side of the Atlantic, Core Price Consumer Expenditures data will be released, the inflation metric most closely watched by the Federal Reserve.
What bothers me is USDWhat's the near-term outlook for ? See all the insights available in our quarterly forecasts. Request your free guide now.
Recommended by Diego Coleman
Get your free USD forecast
Eurozone
The European Central Bank is expected to cut borrowing costs from a record 4% at its June meeting. However, the extent of any further rate cuts will depend on the inflation outlook. In this sense, the preliminary May CPI report will provide valuable insights into recent price developments in the region's economies and play a pivotal role in guiding the trajectory of monetary policy.
Analysts expect euro zone inflation to rise to 2.5% year-on-year this month from 2.4% in April, while the core measure is expected to remain stable at 2.7%. A slight increase in the headline measure may not deter the ECB from pulling the trigger next month, but an unexpected upside could prompt the institution to adopt a more cautious approach to future easing. Given these developments, euro FX pairs may see increased volatility heading into the weekend.
I want to know where it is EUR Where will the coming months take you? See all the insights available in our quarterly forecast. Request your free guide now!
Recommended by Diego Coleman
Get your free EUR forecast
we
Core PCE deflator data is also due for release on Friday. The consensus forecast is for a 0.3% increase in April, with the annual rate falling to 2.7% from 2.8%, a small but positive sign. A downside surprise could rekindle optimism that the disinflationary trend that began in the second half of 2023 and stalled earlier this year is back on track, strengthening the case for the FOMC to shift to an accommodative stance at some point in the fall. This would be bearish for the USD but positive for stocks and gold.
Conversely, if inflation turns out to be stronger than expected, the interest rate outlook could shift to a more hawkish direction, delaying the timing of the Fed's rate cuts. In this scenario, November or December could become a new benchmark for potential moves by the U.S. central bank. Such a development could push up bond yields and the U.S. dollar, creating a more challenging environment for stocks and precious metals.
To learn more about the variables that may affect financial markets in the coming week, take a look at the comprehensive forecasts and analysis provided by the DailyFX team. Our expert analysis will help you navigate dynamic market conditions and make smart trading decisions.
For more detailed analysis on gold's fundamental and technical outlook, download our free Quarterly Trading Forecast now.
Recommended by Diego Coleman
Get your free gold forecast
Fundamental and Technical Forecasts
GBP weekly forecast: Lack of local data may lead to decline
The pound has largely ignored the announcement of the UK general election, with economic fundamentals still playing a major role.
Gold Price Forecast: Bearish bias remains for now, but core PCE data will be key
In this article, we take a closer look at the fundamental and technical outlook for gold, focusing in particular on analysing price movements and potential scenarios following the release of US PCE data later this week.
US Dollar Forecast: PCE Inflation Data Holds Key as EUR/USD, USD/JPY Await Catalyst
The US Dollar may show some resilience ahead of important PCE inflation data, while EUR/USD looks for a catalyst and USD/JPY maintains its uptrend as traders keep an eye on German and EU inflation figures as indicators.
